Olivier Monnier and Paul Wallace

Nigeria in talks with ICD on Sukuk deal to diversify funding

Nigeria is in talks with the investment arm of Saudi Arabia-based Islamic Development Bank about issuing the country’s first sukuk as the West African nation looks to diversify its sources of funding.

“We are engaged in discussions with Nigeria,” Khaled al-Aboodi, chief executive officer of the Islamic Corporation for the Development of the Private Sector, said Tuesday in an interview in Ivory Coast’s commercial capital, Abidjan. “Once they feel this is a good option to go, we’ll be very happy to accompany them on this process.”

Nigeria, West Africa’s biggest economy and home to about 80 million Muslims, is trying to diversify its funding sources to support an economy that’s been battered by the collapse in oil prices since mid-2014. Output is set to shrink this year for the first time since 1991, according to the International Monetary Fund.

Attracting Capital

The head of the country’s debt management agency said in January that selling sukuk would help in attracting capital from Gulf states and Islamic markets. Nigeria is planning to issue a $1 billion Eurobond this year, which would be its first such deal since 2013. Osun State in southwestern Nigeria has sold the only sukuk from the country. In 2013, it raised 10 billion naira ($32 million) that is due in 2020 and pays the equivalent of 14.75 percent interest.

“There has been issuance in the past by one of the states inside Nigeria but now there’s discussions at the level of federal government,” Al-Aboodi said. The timing of any potential transaction was up to the Nigerian government, he said.

Nigeria is planning to borrow more abroad than locally to fund next year’s budget in a bid to benefit from lower debt costs and reduce pressure on its interest bill, Budget and National Planning Minister Udoma Udo Udoma said on Oct. 12. The country plans to raise as much as $4.5 billion in international markets through 2018, according to the debt management office.